Investors love a good dividend, but companies have to earn the money before they can give it away.
That's a fact that seems to have been lost on almost 20 percent of the companies paying dividends in the S&P 500 that paid out more than they earned in the last fiscal year. That's up from around 9 percent a decade ago.
One way to judge the sustainability of cash dispersals is to look at a company's dividend payout ratio, as ClientFirst Strategy president Mitch Goldberg pointed out in recent commentary on CNBC.com. The ratio is simply the dividend per share divided by earnings per share, with a number above 1 (or 100 when expressed as a percentage) indicating that the company is paying out more than it's earning.
Generally, lower numbers mean the company has more space to maneuver before it would ever have to cut its dividend. A company with a 50 percent ratio could lose half of its earnings and still pay its dividend.
For all companies in the S&P 500, that ratio has been rising steadily over the last decade. Today, the median ratio is at a high of 37 percent, compared to 20 percent in 2006. That means that while half of all companies had ratios below 20 percent a decade ago, only about one in five do today, and more than twice as many are in the possibly unsustainable red zone above the break-even of 100 percent.
Explore the data by hovering over each company below and using the slider to look at different years: